Chevron Corporation CVX is facing a significant setback with the U.S. government revoking its conditional license to operate in Venezuela. The company has been given just 30 days to wind down operations, cutting off a key source of heavy crude supply to U.S. refiners. This abrupt exit eliminates a revenue stream that had allowed Chevron to recover billions in outstanding debts from the region. While the company maximized its gains before the policy reversal, the loss of Venezuelan assets could weigh on long-term cash flows and supply-chain stability.

CVX Stock Struggles to Gain Momentum

Chevron's stock has been stuck in an extended consolidation, trending mostly sideways with a slight downward bias over the past two years, delivering a modest -0.2% return. Investors are growing frustrated with its lack of momentum — particularly as broader market trends remain mixed. The Oil/Energy sector has faced volatility, and Chevron's struggles with refining margins and weaker cash flow trends have not helped. With the stock at a crossroads, the key question is: should investors buy, hold, or sell?

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The Bullish Case: Chevron’s Strong Fundamentals and Growth Potential

Reliable Dividend Growth and Shareholder Returns: Chevron continues to be a strong dividend player, having increased its payout for 37 consecutive years. The latest dividend hike of 4.9% takes its yield to over 4.5%, making it a reliable income source for long-term investors. The company has also maintained aggressive share buybacks, further enhancing shareholder value. With stable cash flows from its core operations, Chevron remains well-positioned to sustain its capital return strategy even amid near-term headwinds.

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Upstream Expansion Driving Production Growth: Chevron’s upstream portfolio remains a key strength, with strong production growth from the Permian Basin and Kazakhstan. The company is targeting a 6% annual production increase through 2026, with high-margin projects driving long-term value. The Tengizchevroil (TCO) expansion in Kazakhstan and increased efficiency in the Permian are expected to bolster output, supporting Chevron’s long-term earnings growth.

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Hess Acquisition Expands Long-Term Reserves: The $53-billion acquisition of Hess HES is a strategic move to expand Chevron’s asset base and lower its breakeven costs. While the deal faces regulatory scrutiny — particularly from ExxonMobil XOM, which has challenged Hess’ Guyana stake — the Federal Trade Commission has already cleared the transaction, making approval likely. If finalized, the deal will enhance Chevron’s long-term production profile, further strengthening its competitive positioning.

The Bearish Case: Near-Term Challenges Persist for CVX

Loss of Venezuelan Operations: Chevron’s exit from Venezuela not only cuts off a revenue stream but also disrupts supply chains for U.S. refiners. The company’s joint ventures with PDVSA accounted for nearly 20% of Venezuela’s oil output, meaning the loss could have broader implications. With alternative heavy crude sources facing tariff risks or logistical challenges, the situation adds uncertainty to Chevron’s refining and trading operations.

Weak Cash Flow and Refining Struggles: Chevron’s cash flow from operations fell sharply in Q4 2024, falling 30% year-over-year to $8.7 billion from $12.4 billion. This significant decline raises concerns about the company’s ability to sustain dividend growth and capital investments. Additionally, refining margins have been under pressure, limiting earnings potential from its downstream segment. If these trends persist, Chevron may struggle to maintain its aggressive capital return strategy.

Oil Price Volatility Weighs on Earnings Outlook: Crude oil price fluctuations remain a key risk for Chevron. With oil recently reaching its lowest levels of 2025, further declines could pressure revenue and profitability. Additionally, over the past 30 days, the Zacks Consensus Estimate for Chevron’s 2025 earnings has moved downward, reflecting concerns over commodity price volatility and refining weakness.

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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

A Word on Valuation

Despite its challenges, Chevron remains an appealing option for value investors. The stock trades at a forward 12-month price-to-earnings (P/E) ratio that is at a discount relative to ExxonMobil. This undervaluation is further supported by a Zacks Value Score of B, indicating potential upside for investors who can withstand near-term volatility. If oil prices recover and the Hess acquisition is finalized, Chevron’s stock could see a meaningful re-rating.

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Conclusion: CVX Stock is a Hold

Chevron finds itself at a critical juncture. The loss of Venezuelan operations, weak cash flow trends, and refining struggles pose near-term challenges, while strong dividend growth, upstream expansion, and the pending Hess acquisition support its long-term potential. Despite an attractive valuation, oil price volatility and earnings uncertainty call for patience. Given the mixed outlook, CVX is currently a Zacks Rank #3 (Hold) company, with investors best served by waiting for greater clarity on oil prices and operational execution before taking a stronger position.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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